We need more catalyst companies
Business as a tool for driving change
The most interesting companies use business not just to deliver value to customers, but as a means of driving some impactful social or structural change in a larger picture. I call these companies catalyst companies. A catalyst company’s business model doesn’t just deliver a product, it’s also designed to be a catalyst for a specific shift in the market, and in how people act and think.
Breaking Entrepreneurship 101
Entrepreneurship 101 will teach you that the most important thing in starting a company is to find a product-market fit and validate a repeatable revenue model. The first and most important thing on an entrepreneur’s mind should always be to be solving a problem that’s valuable, and that lots of people will pay to fix.
For most companies, that advice is gold, and it works, because the problem being solved is a problem the customers have today. It’s a traveler needing a ride to the hotel or a photographer in need of a better tool. Lots of businesses start with well-defined, if not immediately clear, problems to solve for people.
But catalyst companies have it a little tougher, because the problem the founder of a catalyst company is tasked to solve isn’t something a single product can resolve, nor is it something that a single customer can pay to have fixed. It’s usually a structural or systemic problem bigger than a single customer. And the product of a catalyst company is much less the actual, manufactured product, what they sell, and much more the business model, and what the company’s product leads people around them to do differently.
So starting a catalyst company has to start earlier than just identifying the right customers and the right kind of product. It has to start from a conversation about what problem in society the company wants to solve, and what kinds of products or new business model might incentivize people to act or think differently.
Take PoetryMe, for example, a “Pandora for Poetry” company that wants to make more people think again about enjoying poems the way we enjoy music or movies. The problem PoetryMe wanted to solve — making people think differently about poetry — isn’t a problem that a single product can solve. It’s bigger, and takes more careful planning.
This is why catalyst companies are the most interesting: the reason a catalyst company exists is much bigger than the value they provide through the end product, and to solve the problem such a company is founded to solve, involves much more than delivering a good product. It involves executing a business plan that doesn’t just fit the market, but shifts and influences it.
Tesla, the poster child
Elon Musk’s vision under Tesla is the poster child for a catalyst company. Musk’s oft-repeated raison d’etre for Tesla has little to do with selling as many electric cars as possible. Tesla exists for a larger goal:
to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible
Notice it says little about the exact kind of product they want to ship, or the kind of customer problem they want to solve. It’s about a shift Tesla want to see in the market — people moving more quickly to sustainable transport — and how Tesla’s business will be a catalyst to that change.
Tesla are executing well on this mission. Even though they’re struggling to ship actual, finished cars out of their Fremont, Calif. factory, they’ve made electric cars more desirable, by building a business plan that allowed them to put money to bringing appealing electric cars quickly to the market.
Tesla is the poster child for a catalyst company, but it’s not the only one, and certainly not my favorite.
Patreon’s rise is not quite as meteoric, but their story is just as interesting. Patreon is a monthly memberhship service that allows fans to monetarily support online creators, and even though it’s a much different kind of venture from automotive manufacturing, as a catalyst company, it shares a core trait. The “problem” it was founded to solve — that there wasn’t a sustainable earning that ensured creative freedom for online makers — wasn’t so much a customer-issue, but a problem in the market and society at large. And through its business model it pioneered a solution that clicked, and that’s created a new kind of career online.
The problem of ensuring sustainable living for creators isn’t being solved by a single product Patreon ships. It’s instead being solved by incentivizing people to support online creators, a shift in the way people are thinking that Patreon, as a business, is able to create.
Business as a problem-solving method
There are a few more companies that come to mind as catalyst companies. Medium, as founder Ev Williams outlines in the inaugural post, was focused from the beginning on improving the quality of writing online. And you can see that in the initiatives the company has taken beyond simply pushing its subscription platform, like paying great writers on the platform from the company’s budget.
PoetryMe, a company I mentioned above and I helped start in 2017, was founded to revive poetry in our cultural ethos. And lots of crowdfunded projects are also focused on causing some market shift beyond simply solving the customer’s immediate problem.
Catalyst companies tend to exist in a space somewhere between product-focused corporations and mission-driven nonprofits. Catalyst companies are more mission-focused than pure, product-focused companies like 3M or Nike, because making an impact in the market beyond the product is built-into the founding motive of the company. But they are also fully realized, for-profit corporations, which in the right hands comes with as much financial and legal freedom as necessary to make the biggest impact in the world, especially compared to nonprofits, which are much more tied down by law.
There are also some companies that look like catalyst companies, but aren’t founded as such, and other companies that started as catalyst companies, but have grown to look more like traditional corporations — it’s a spectrum.
The easiest way to tell a catalyst company that exists to cause a shift in the way society works from a traditional company is to listen to the founders. A traditional company focused on products can do a lot of good with a wide-reaching mission. But the most interesting cases are the ones where the entire company’s existence is built on the founders’ belief that solving a big problem in our world is so important that it cannot wait any longer.
For these founders and companies, business is more than a way to create value. It’s a powerful problem solving method, standing atop the strength of the laws of economics and the freedom of entrepreneurship.
When we want to start an organization to address big, important problems, I think too many people jump to conclusions and think a non-profit organization is the way to go. But I wish more people also thought of catalyst companies, because companies can do more than just fill the coffers of shareholders. The freedom and potential that come with the second option can be worth the extra effort.
Hey, you! Thanks for reading, and if you have any thoughts, please reach out to me! I’m always happy to hear your response to my thoughts.
I also did something new this time and shared my draft for this piece, and the revisions I made, on Google Docs. If you’re ever curious about my writing process, feel free to take a look.